No small potatoes: Landing your first major contract

Andrew Patricio well remembers the mixed emotions he felt when his two-man consulting firm scored its first major contract with a big Canadian retailer.

There was the elation and the sense of achievement at striking it big – following about two years of painstakingly wooing the company.

And then, "I don't think I slept for a month after we got the contract," Mr. Patricio recalls. "Like a typical small business owner, you really [try] to get the contract – but when you get it, you realize you've got to do the work."

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Landing that first big customer certainly brings its rewards, but it can be a long and arduous path, small-business observers say.

There are about 2.4 million small businesses in Canada, Mr. Patricio says, and, by his reckoning, just 1 per cent to 2 per cent of them are supplying a product or service to large companies.

As one example of how tough it can be to get in the door, Steven James, senior director of strategic sourcing at PepsiCo Foods Canada in Toronto, says that 85 per cent of would-be suppliers who reach out to his company are politely declined.

But when they get in, if they do it right, the relationship can be long-lasting and rewarding.

Farmer Jack Murphy, who lives near Alliston, Ont., is one of just 30 from across Canada who supply potatoes for Lay's potato chips, part of Frito-Lay Canada, a division of PepsiCo Inc. (He also co-stars in one of the TV commercials that Frito-Lay Canada has aired extolling its potato growers.)

Through three decades and three generations, the Murphy family farm has been a supplier to the Lay's brand.

Mr. Murphy ties that longevity to providing quality potatoes year in and year out. He can go on at length about potato cultivation, how he must finesse the soil on his 460-acre farm to make it loose enough for growing potatoes, how he takes care not to bruise the seed potatoes, and how storage temperature matters.

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"We've been growing processing potatoes for a long time.…At the end of the day, it's the quality that you're providing them that's going to keep you there," he says.

For Mr. Patricio, scoring that contract with Staples Inc. about five years ago to run business-startup seminars was a springboard for his company, Toronto-based Bizlaunch Media Inc., to forge similar partnerships with the likes of Bank of Nova Scotia, Microsoft Corp. and Bell Canada to provide small-business advice products, such as seminars, guides, and website content.

Still, the David and Goliath dance can come with a double-edged sword, notes Albert Luk, a partner at Toronto tax and business law firm Nesathurai & Luk LLP.

"It's great in terms of prestige and, obviously, revenue," he says. "The other side of the sword, so to speak, is large companies do require a lot of resources."

Mr. Patricio had to be prepared for that once he signed up Staples.

He began his pursuit of the office-supplies retailer by a method he doesn't normally recommend – a cold call. "It was a long process. I would phone them regularly, I kept communicating with them."

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The better way to get a foot in the door of a big client, he says, is to use good, old-fashioned pressing the flesh and gumshoe work – networking and attending trade shows and conferences – and building relationships. "Find somebody that knows somebody that knows somebody to introduce you."

A little bit of serendipity doesn't hurt, either, he adds.

After two years of trying to get on Staples' radar, but getting nowhere, he says he was all set to give up. And then a call arrived that the company was prepared to talk seriously.

It turns out, a woman who runs one of Ontario's small business centres in Markham, Ont., and for whom Mr. Patricio's firm had provided seminars, shopped for office supplies at a local Staples outlet. Someone there asked her if she knew anyone who could hold seminars in the stores – and voila. "I built up a relationship with her, she knew that we ran seminars and that's the way it happened," Mr. Patricio recalls.

The contract would be worth "a few hundred thousand dollars," Mr. Patricio says, a big portion of Bizlaunch's business – but not before it did the work to make sure that it could deliver.

That meant ramping up a network of 40 trainers to conduct the seminars at Staples outlets across Canada.

That's a key element that big companies look for in a small player: that they can deliver the goods with quality assurance and in a timely fashion, experts say.

Roger Pierce, formerly a partner with Mr. Patricio at Bizlaunch before striking out on his own with a Web-based consulting firm, Newcomer Startup, says small players need to demonstrate what he calls "scalability and bandwidth" – having the means of production.

"You've got to line that up. You can't go into the corporation and promise it without at least having it ready to go," Mr. Pierce says.

"It doesn't matter how many employees you have; it's how many people support your company."

For small businesses that would like to reel in a big customer, Mr. James suggests starting small, getting your business and capabilities to a confident point, then bringing examples of what you do well to the big company.

You might do a small job first to prove you can deliver the goods, with quality and on time, he adds.

Make sure you have all systems in place before you make any approach, he warns. "To come in without the ancillary or the supporting capabilities isn't setting [yourself] up for success – nor ourselves," he says.

Networking is also important. Mr. James says he makes most of his connections with potential suppliers through trade associations, journals and working with umbrella organizations.

His team at Pepsico spends about 30 per cent of its time developing myriad suppliers involved in the making of snack foods, organizing "summits" on subjects such as chipping potatoes and bringing in agronomists for workshops.

While most wanna-be suppliers who approach are declined, those who show potential are sometimes brought on in a development program the company has set up to nurture future prospects – a kind of farm team, he says.

"Maybe they're good at making the widget, but they don't have very good quality systems that we would require. If we think they're a good partner in the long term, we may help them develop their quality programs, in advance of us ever doing business with them," Mr. James explains.

It may take several months to consummate a deal, requiring multiple interviews and several approvals through a larger company's chain of command, Mr. Luk says.

"If it's a relatively new and novel product, be prepared for the fact there's going to be a lot of education – and a lot of education to multiple sources in the same company. You will need buy-in from different departments."

As well, cash flow can be a concern, he says. You may not get paid as quickly as you'd like as your invoice wends its way through the larger company's system. "You'll see a legal contract the size of which you've never seen before."

Mr. Luk's advice: Don't put all your eggs in one basket, and don't forget about servicing the smaller contracts that have been your bread and butter.

"Be prepared to find other customers to put food on the table, to pay the bills, while you're pitching to the larger corporation."

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